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Developing Agri-Insurance in Ukraine

Developing Agri-Insurance in Ukraine. Iryna Golovko Deputy Project Manager IFC Ukraine Agri-Insurance Project. Unique E xperience to Develop Agri-Insurance in Ukraine. Law on State program to support agri-insurance adopted in 2012 Separate mandatory license for agri-insurance introduced

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Developing Agri-Insurance in Ukraine

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  1. Developing Agri-Insurance in Ukraine IrynaGolovkoDeputy Project Manager IFC Ukraine Agri-Insurance Project

  2. UniqueExperience to Develop Agri-Insurance in Ukraine • Law on State program to support agri-insurance adopted in 2012 Separate mandatory license for agri-insurance introduced State program on licensing and certification of loss adjustors launched Agrarian Insurance Pool established Standard insurance products for 10 crops developed and introduced in the market Wide-scale public awareness campaign reached more than 40% of Ukrainian producers Annual market analysis performed Banks use agri-insurance as quasi-collateral

  3. UKRAINE After project launch, a well designed program will grow. ESTIMATED ESTIMATED 9 month initial product development ACTUAL SALES 2009 2010 2011 2012 2013 first product launched 4 products launched subsidies initiated 5 products launched new law on agri-insurance IFC experience in Ukraine can be replicated (shown above) subsidies increase A2F linkage Insurance & Banks 3

  4. Multi-Peril Crop Insurance (MPCI) Products developed by the IFC Project and Implemented in the Market (І) INSURANCE OFCROPS AND FUTURE YILED forTHE WHOLE PRODUCTION CYCLE Winter wheat / Winter barley Winter rye / Winter triticale Winter rapeseeds (canola) (ІІ) INSURANCE OF FUTURE YILED forSPRING-SUMMER PERIOD Winter wheat / Spring wheat Winter barley /Spring barley Winter rye / Winter triticale Winter rapeseeds (canola) Corn Sunflower Sugar beets (ІІI) INSURANCE OF CROPS for WINTER PERIOD Winter wheat / Winter barley Winter rye / Winter triticale Winter rapeseeds (canola) ***blue are the crops currently modified according to the requirements of the state program Make 1/3 of the Ukrainian market in 2012

  5. Our team commits 30% of work to Global Index Insurance Facility (GIIF) Automated weather stations: Depending on the quality of current and historical data, rainfall data from weather stations in the covered area can be used for index products. Satellites: Satellite data on rainfall, vegetation, and wind speed can also be used for index products. Combined Data Sources: Methodologies are developed to combine various data sources to extend the area of coverage and the years of data available for actuarial analysis. Weather index: Payout is based on specific weather parameters (such as rainfall level or temperature). Area-yield index: Payout is based on average yield of an insured unit such as a county or district, not the yield of individual farmers. Hybrid insurance: Includes index and indemnity based insurance to deal with basis risk when targeting small farmers. Index insurance provides tailored solutions that combine the best product structures and data sources.

  6. Agri-Insurance Toolkit & how to translate it into generalized toolkit for other regions

  7. This Programmatic Approach is Relevant to any Developing Country Optimal approach is to start with human development, develop enough capacity to build on it, and make the system sustainable

  8. An effective and viable agri-insurance system IS possible in case ALL the KEY Stakeholders are interested and engaged into process

  9. Financial market Agrarian sector Producer Weather risk profile Databases Government • In-depth interviews with agri-producers with the aim to estimate the market potential, producers’ profile and basic weather risks in agriculture • Access to databases necessary for agri-insurance (yield-level, weather & satellite data) • Legislation & State regulation • State programs to support agri-sector • Insurance market capacity • Reinsurance • Agri-producers’ access to financial resources • Input suppliers present in the market

  10. Draft a Concept for agri-insurance market development • Use international leading practices were applicable • Agree to the Concept in the participatory manner with all the key stakeholders: • Agri-producers • Insurance companies • State • Coordinate with the international reinsurance providers in Concept development • Develop the relevant legislation & State regulations • Develop data bases for actuarially sound calculations

  11. Training and education of insurance experts • Development of insurance products in cooperation with insurance companies and agri-producers • Application of actuarially sound practices • Development of a competent underwriting and loss adjustment system in insurance companies • Preparation of reinsurance submissions

  12. Implementation of the relevant legislation & State regulations • Establishment of the public-private partnership among: • Farmers • Insurance companies • State • Establishment of the necessary associations to implement a program

  13. Public awareness & marketing campaign • Education & training campaign for agri-producers • Launch of new insurance products/programs • Joint pilot programs withBanks, MFIs, Input Suppliers, Value Chains • Monitoring of the insurance products implemented in the market • Improvements & further development of the system

  14. Focus efforts to produce the agri-insurance product in 9-12 months • Product development: • Concept agreed with financial institutions; • Data cleaning and rating; • Design of policy • Reinsurance submission Stakeholder Meetings; Planning, PSA negotiation; Training on data acquisition and management Product launch (bundled with credit) Assessment of market opportunity & initial product concept START 1 month 2 months 9 months

  15. Agri-Insurance Development Strategy:Identify Local Insurance Company & Bank/MFI with Interest and Commitment • Look for insurance companies that have: • … capital capacity • … trainable personnel • … distribution system for rural areas • … demand from clients • … strategy to develop agri-insurance • … ready to sign PSA and collaborate AGRI-INSURANCE • Look for Banks, MFIs, Input Suppliers, Value Chains that: • … want to increase ag portfolio • … will bundle insurance with lending • … want risk management instruments • … ready to participate in the design of an insurance product that meets their needs

  16. Five Manuals Covering Major Developmental Strengthening Requirements: Introduction to Agricultural Insurance and Risk Management Actuarial Basics Data and Information Management Risk Transfer Credit and Insurance, Marketing, Participation, and Illicit Behavior Resources Available for the Development Ukraine Agri-Insurance team is able to support your project preparation & implementation Other Knowledge Management Activities and experienced IFC Staff 17

  17. IFC Ukraine Agri-Insurance Development Project Gary Reusche: GReusche@ifc.org IrynaGolovko: IGolovko@ifc.org +38 095 273 49 37 +38 044 490 64 00 18

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